Pertanika J. Soc. Sci. & Hum. 21 (S): 111 - 126 (2013) ISSN: 0128-7702 © Universiti Putra Malaysia Press SOCIAL SCIENCES & HUMANITIES Journal homepage: http://www.pertanika.upm.edu.my/ Article history: Received: - Accepted: - ARTICLE INFO E-mail addresses: mazrah@upm.edu.my (Mazrah Malek), saidatunur@upm.edu.my (Saidatunur Fauzi Saidin) * Corresponding author The Impact of Interlocking Directorates on Corporate Performance of Bursa Malaysia Listed Companies Nurhaniza Saidin 1 , Mazrah Malek 2 * and Saidatunur Fauzi Saidin 2 1 Inland Revenue Board of Malaysia, Bangunan Dewan Perniagaan Melayu, Lebuh Pantai, Peti Surat 660, 10910 Pulau Pinang, Malaysia 2 Department of Accounting and Finance, Faculty of Economics and Management, Universiti Putra Malaysia, 43400 Serdang, Selangor, Malaysia ABSTRACT One of the main concerns about interlocking directorates is their effect on corporate performance; however, there is little research undertaken on this issue. Therefore, the objective of this study is to examine the effect of interlocking directorates on corporate performance by considering the nature and the direction of interlocking. The analyses are based on the data of 741 listed companies on Bursa Malaysia in 2007. The Ordinary Least Square regression results show that the number of interlocking companies, inter-industry interlocking directorates and interlocking created by independent directors are all significant and positively related to corporate performance, which is consistent with the resource dependence theory and the corporate governance theory. However, it is also discovered that both multiple directorships by executive directors and non-executive non-independent directors do not have any effect on corporate performance, which is consistent with the class integration theory. Despite the negative perception on interlocking directorates by the public, the findings suggest that interlocking directorates actually benefit shareholders by enhancing the earnings performance of the corporation. Keywords: Corporate performance, directors, interlocking directorates INTRODUCTION The issue of directorships has long been discussed in corporate governance research and by policy makers due to the importance of the role of directors in the corporate structure. Among the debated issues is the matter of interlocking directorates, where directors of one company hold additional